Global chip revenue for 2010 to rise by 35.1% says iSuppli

Dale Ford, analyst with iSuppli, said: "With an $80.7bn increase, 2010 will bring the largest annual expansion in semiconductor revenue in history in dollar terms. In comparison, semiconductor revenue increased by slightly less than $60bn during the next best year for dollar chip growth: the dot-com-fueled year of 2000." According to iSuppli, as well as strong consumer demand for electronic products. semiconductor sales are rising because of factors such as rising prices, inventory buildups and richer chip content in products like smart phones and advanced lcd tvs. "All this is causing chip revenue to bulge to awesome dimensions this year," said Ford. Strong semiconductor revenue growth in 2010 is based on an increase in the sales of electronic equipment. iSuppli says factory OEM revenue for electronic equipment is projected to grow by $131bn to reach $1.54trillion in 2010, up 9.3% from 2009. The previous high for electronics OEM revenue was $1.53trn in 2008. Shipment and revenue growth for electronics equipment is surpassing expectations in areas including pcs, cell phones, lcd tvs and other semiconductor-rich products. However, Ford believes percentage semiconductor revenue growth will vastly exceed the expansion of the end-equipment markets for a number of reasons, including pricing. "Careful management of semiconductor inventories and tight controls on manufacturing capacity have resulted in an environment where supply is not able to match demand. As a result, prices for many semiconductor segments are inflated. "Furthermore, the adoption of innovative technologies both at the system and component level is resulting in rising sales of highly integrated semiconductors that capture a larger share of the value of electronics systems. These integrated semiconductors tend to command higher pricing. "Following deep cost and inventory cutting efforts in 2009, the semiconductor industry has been pushing to build up stockpiles across the supply chain to support the strong growth in demand for electronics. This also has enhanced semiconductor growth beyond what end demand would seem to dictate." While Ford compares the growth of 2010 to that of the year 2000, he adds that the nature of this cycle is completely different from the 2000 period. "The booming growth of 2000 followed a strong expansion in 1999 and was driven by an unsustainable bubble of demand. That bubble popped in 2001 with a collapse of 28.6%. In contrast, the 2010 growth represents a recovery from a collapse in the prior year of 2009 and is forecasted to continue into 2011." iSuppli projects a return to more standard growth patterns in the second half of 2010 and into 2011 that will result in semiconductor revenue growth of 7% next year. Ford continued: "The sequential semiconductor revenue increase of 8.2% in the second quarter of 2010 is expected to represent the peak growth period this year. Growth will decelerate to 6.7% in the third quarter and to just 0.4% in the fourth quarter." According to the analyst's report, the industry will enjoy seven sequential quarters of growth before a seasonal downturn occurs in the first quarter of 2011. This will be the longest period of consecutive quarterly growth since the industry grew by 19 straight quarters between 1991 and 1995. iSuppli believes the memory segment will generate some of the strongest growth, with dram revenue rising by more than 86% and nand flash memory expanding in excess of 33%. This, says the analyst, will cause overall memory revenue to rise by 56% percent for the year.